What happens when you apply modern technology to an ancient practice? A new report from Boston-based Celent concludes that insurers and the vendors that supply them need to answer some fundamental questions before they can reap the rewards of the fast-growing market for takaful, a form of mutual insurance popular in the Muslim world.

According to the report, takaful, once a niche product sold largely by small local operators, is rapidly being embraced by multi-national financial services firms with sophisticated product differentiation and distribution capabilities.

The report, Policy Administration Systems for Takaful: A Global Solution Spectrum, was authored by Celent analysts Catherine Magg-Stacey and Ashley Evans, and examines the issues that are shaping the market worldwide. A lack of economies of scale and comparatively lower use of technology, means takaful companies are operating with inflated expense rations, according to the authors.

“Takaful companies, particularly in the Middle East, have shown higher expense ratios than their conventional counterparts,” the report states. “Over time, volumes will rise, and higher customer persistence is expected to offset the expense ratios to some extent. The

final key to managing the expense ratios lies in the use of technology.”

“Policy administration systems are the beating technological heart of any insurance company and this is equally true for takaful companies,” it states. “Given the specificities of a takaful company, a critical element to a successful policy administration system is a flexible architecture. Fortunately, for those entering into this market, many of the modern policy administration systems offer this with user-friendly interfaces and tools allowing configuration of products, workflow, and reports.”

Yet, the report finds many barriers to widespread technological adoption in the takaful market, including a lack of standardization.

“In the short term, it is unlikely that national or international takaful standards will emerge,” the authors state. “Even though many industry players acknowledge the benefits to be gained by harmonization, the reconciliation of the varied approaches espoused by competing associations and standards boards will be a formidable challenge.”

Challenges notwithstanding, the rapid growth of the takaful marketplace will entice insurers and vendors alike to target it. Celent predicts the global takaful market will grow to $7.39 billion by 2015, with the greatest growth in the Middle East and Southeast Asia. “For the moment, the growing takaful market presents a niche opportunity, and the small number of vendors with takaful experience reflects this. However, the sustained double-digit increase in premium in this market will see a commensurate increase in takaful operators/windows in the next few years.”

For those of us involved in the space becoming more and more known as ‘Islamic’ Finance – the future remains unclear and murky. While assets under management and the nominal size of participation in this industry increases exponentially, we are discovering that less and less of the conventional financial system is changing. So what effect, if any, is Islamic Finance having? Since its humble beginnings in the 1960’s, what has changed? More importantly, what has not, even though we think it must?

The most important change perhaps has been that financial practitioners and professionals have become accepting of the idea that Islam has quite a bit to say about our economic lives. The notion that guidance from Above is not limited to the spiritual realm is, while obvious, deeply revolutionary. Having this idea accepted by staunchly secular institutions such as states, governments, banks, investment houses and other corporations is not an inconsequential change.

What has not changed though, is the substance of how capital is created or even how it is allocated. Money is primarily created as debt or credit by banks, and access to credit determines wealth to a great degree. This inflationary cycle has not changed, and is unlikely to change given our trajectory. Much of the impact of Islamic Finance has taken place at the microeconomic level – the macroeconomic and global financial systems remain unchanged and impervious. Our welfare is still subject to the vagaries and machinations of Central Bank musings on interest rates. More importantly, all mankind is subject to taxation through the inflation inherent in paper money.

The challenge before us then, is real, complex and demands hard work. In other words, it seems almost insurmountable. This has caused a variety of reactions. Some have redefined the challenge to make it something more manageable – elevating form over substance. Others have redefined the space within which they operate – lending vs. investing.

Let us however, make no mistake about what is ultimately required. There must be a genuine alternative to borrowing money on interest in order to finance purchases and operations. The system must reward risk-sharing between parties as opposed to the transfer of risk to borrowers. Only then can we say that Islamic Finance provides a credible choice. This is the challenge that lies before us, not the replication of conventional outcomes through apparently ‘Islamic’ means.

It has been the practice among modern Islamic and Western historians to depend upon the traditional historical and biographical works in writing the history of pre-Islamic and early Islamic centuries. The general history of al-Tabari (d. 310 A.H.) figures prominently in this endeavor, and so do later historians who followed his method of recording history. Earlier histories, like that of Ya’qubi (d. 277 A.H.), as well as earlier topical works of biographies and military campaigns, like the biography of the Prophet by Ibn Ishaq (d. 151 A.H.) — preserved in its later recession by Ibn Hisham (d. 218 A.H.)— and the monumental biographical dictionary of Ibn Sa’d (d. 230 A.H.), and the works on campaigns and conquests by al-Waqidi (d. 207 A.H.) and al-Baladhuri (d. 279 A.H.) are also cited. Sometimes one might encounter a reference to one of the main compendiums of hadith, or traditions of the Prophet, for the methodologies of both sciences are similar — if not identical — and one, history, can be said to have emanated from the other. One might also find a reference to one of the administrative or fiscal manuals that were intended, for the most part, for the edification of governmental secretaries. Even one might find a reference to a work of literature — horror of horrors to a historian — like that of al-Aghani. But he would look in vain for any reference to an early and authentically-attributed work like that of al-Muwatta’ by Malik ibn Anas (d. 179 A.H.).

Several reasons car be advanced for this neglect. One is that historians have, in the main, been interested in political history, and works of law, like al-Muwatta’, admittedly do not quench the thirst of the political historian. Another is the notion that most works of Islamic law are casuistic by nature, that they seem to picture an ideal law for an ideal Islamic state divorced from the practical considerations of daily life, and, therefore, that they do not reflect historical reality. A third is that the methodology of law is different from that of history in that it does not entirely depend upon the verification of accounts through isnad, and therefore a historian might not know what to do with law, or how to handle it! Finally, books on law are admittedly difficult to understand by the average historian, particularly in the West, and therefore their meager fare of points of historical interest, arrived at after much effort, was overlooked in the scurry toward much greener pastures.

The late Professor H.A. R. Gibb used to lament the fact that works on Islamic law, and particularly works on fatawa, were not being utilized for reconstructing the social and economic history of the Islamic era. A work, like al-Muwafta’ which is the earliest extant work on Islamic law, should logically be among the first works to be so utilized. But aside from modern works on Islamic law and legal doctrine which often refer to al-Muwatta’, this important and early work, as far as I know, has not been touched by social and economic historians, save for the treatment of qirad (commenda) in a work by A.L. Udovitch.1

The question might well be asked — Why should a historian use al-Muwaita’ as a source if it be true that all legal works reflect an ideal state of affairs, removed from historical reality? Here we enter upon a controversial subject that might require several papers to elucidate. Scholars are agreed, however, that not all subjects of the law were theoretical, and that certain subjects, particularly those concerned with personal status, and possibly civil and some dements of commercial law, have been applied throughout the Islamic centuries. Besides, any reader of al-Muwatta’ cannot but be impressed by its practical character — unlike later works which casuistic thinking and religious zeal propelled into the idealistic realm. It is obvious that Malik set about to codify and systematize the customary law of Medina and to give an account of law and jurisprudence according to the consensus (ijma’) and traditional practice (sunnah) of Medina.2 His use of the word “sunnah” seems to have been different from its later use as the model sayings or behaviour of the Prophet. Professor Amin al-Khawli rightly observes about sunnah:

“We see him using it in al-Muwatta’ for a meaning very near to its linguistic meaning, i.e., “the method,” “the way,” as when he says: ‘the sunnah with us concerning musaqat (a contract of partnership involving trees and labour) is that it applies to date palms, grape vines, olive trees, etc’… or he might mean by sunnah the “method” and “way” of the ‘ulama’ as when he says: ‘our generally agreed practice (al-amr al-mujtama’ ‘alayh ‘indana) and the sunnah on which people do not differ (al-sunnah allati la ikhtilaf fiha) and that which I attained from the ‘ulamd’ in our city (alladhi adrakt ‘alayh ahl ai-‘ilm bi-baladina) that the Muslim does not inherit from the non-Muslim.””3. Actually, al-Muwatta’ abounds in expressions just quoted and in others like the “practice” (al-‘amal), “our practice” (al-amr ‘indana) which point to an actual practice that is both practical and accepted.4

Al-Muwatta’, then, can be depended upon to reflect an actual state of affair in most instances. It can also, through allusions to pre-Islamic practices, reflect certain aspects of life of the pre-Islamic period as well. Its cautious use by a historian as a historical source can therefore be warranted. What I shall do in the following pages is to present the results of soundings I made while reading this work for pieces of information that might be of significance to the social and economic historian as well as to those interested in historical anthropology.

Economic Information: As can be expected economic life should figure prominently in a law manual that is primarily concerned with transactions between individuals, with an eye to having them adhere to religious norms, particularly those against usury, and with questions of taxation. In dealing with legal questions, al-Muwatta’ presents — as it were — a lot of economic information as a by-product. We shall take up some soundings in the law of taxation first before going on to the more complicated matters of contract law and commercial dealings.

In truth all the sections on alms giving (zakat) are important because they give us a fairly clear picture as to the agricultural activity and animal husbandry at the time. We can know, for instance, what kind of cereals and legumes were being planted: Malik said, “Cereals (and legumes) subject to zakat are: wheat, barley, thin-husked barley (suit), millet (dhurah), another millet (dukhn), rice, lentils, peas (julubdn), beans (lubiya) and sesame (juljulan).5 Also we can know the fruit trees grown, as these are mentioned in connection with taxable or nontaxable products. Aside from well-known fruits like dates, grapes, figs, etc., we encounter pome-granites and peaches (firsik)6.

In the field of animal husbandry al-Muwatfa’ documents the practice of sheep or goat owners grouping their flocks under the supervision of a single shepherd. Malik says, “If the shepherd be one, the stud one, the pasturage one, and the water-bucket one, then the women (owners of the flocks) arc associates (khalif) even though each one of them differentiates his property from that of the other.”7 This becomes important for purposes of taxation, for such a combined flock is treated as one flock and not as separate flocks.Likewise separate flocks should not be grouped together if it becomes advantageous to their owners — for tax purposes — to do so. Regarding this human failing of evasion of taxation the Caliph ‘Umar said “What is separate should not be grouped together, and what is grouped together should not be separated.” In commenting on this saying Malik says, “This refers to the owners of livestock… (For instance) three owners, each owning forty goats, are legally obligated to pay zakat. (An owner of a flock consisting of at last 40 sheep but not more than 120 sheep delivers one sheep as zakat). But when the tax collector shows up they group them together so as to deliver only one goat….Or the two associates (khalit) each owning 101 goats, and thus liable to deliver together 3 goats, separate their flocks when the tax collector approaches so as to make each liable for only one goal.Such practice was prohibited.”8

Another bit of information regarding taxation is that Christians from Iraq (Nabat), and possibly from Syria, were in the habit of trading in the market-place of Medina from pre-Islamic times until at least the time of ‘Umar, and paid taxes there. Malik reports on the authority of Ibn Shihab on the authority of al-Sa’ib ibn Yazid that the latter said, “I was a young man assisting “Abd Allah ibn’Utbah ibn Mas’ud (overseeing) the market-place of Medina in the time of ‘Umar ibn al-Khattab. We used to take from the Mabat one tenth”…Malik asked ibn Shihab as to the justification for that practice and he answered, “That used to be taken from them in pre-Islamic times, and so ‘Umar charged them with it”.9

The laws of sale and commerce, however, yield most of the information on economic matters; and here the regulatory force seems to be the doctrine against usury. The Prophet, for instance, prohibited a practice that had been prevalent previously, known as earnest-money sale (bay’ al-‘urban). Malik describes it thus: “When a man buys a slave or rents a mount and then says to the person he bought or rented from: I give you one dinar or one dirham, or more or less, on the condition that if I take delivery of the thing or ride what I rented, then what I advanced to you becomes part of the sale price or the rent of the mount, but if I go back on the sale or rent, then what I advanced becomes yours without anything in return.”10 As can be seen, this is a kind of option known to other societies, but it was prohibited in Islam because of an “unjustifiable increase” (riba), since something was gained without a consideration. The fact that some people were willing to pay for an option reflects a fairly advanced stage of commercial dealings.

An account about the prohibition of usury in another instance yields information on a still more interesting economic institution, namely that of dealing with “futures,”similar to that of the Chicago Commodities Market. It seems that when Marwan ibnal-Hakam was the governor of Medina during the caliphate of the first Umayyad caliph,Mu’awiyah (41-60 A.H.) certain documents (sukuk) were assigned to the people of the city entitling them tofood-stuffs that were being brought to the Hijaz (doubtless as kharaj andprobably from Egypt) and collected at a place called al-Ja’r at the seashore.The people of Medina started trading with these documents before they actually received their entitlements of foodstuffs — a practice smacking of risk or even riba if the exchange involved unequal amounts. So Zayd ibn Thabit and another Companion of the Prophet called on Marwan and said, “Do you, O Marwan, consider riba sales as legitimate?” “I take refuge in God (from that)”he said, “and what is that?”They said, “These sukuk are being bought and sold before the receipt of their equivalence.” Whereupon Marwan sent his guards to track down these documents, to remove them from the hands of their holders and to return them to their original owners.11

As is well-known, risk (gharar), no less than riba, might vitiate a contract. The Prophet is reported to have prohibited the practices of mulamasah and munabadhah. Malik defines them thus: Mulamasah is when a man touches or feels (yalmas) a garment, but does not unfold it nor ascertain (its character), and munabadhah is when a man throws to another (yanbidh) a garment (in exchange for) a garment that the other throws to him without both of them examining them. He therefore says that it is not permissible to sell a Persian mantle (saj or taylasan) which is inside its cover or a Coptic garment in its fold unless they are unfolded and their inside is seen, because their sale (in their folded state) is a sale of risk.12 Malik could not, however, disallow the well-established practice of selling whole bales of goods on the basis of their description in an accompanying catalogue or list of contents (barnamaj), without actually unfolding them, for then it would become impossible to conduct wholesale trade. He, therefore, says, “The sale of bales according to the bamamaj is different from the sale of a Persian mantle in its cover or a garment in its fold… The difference between them is (based on) the actual practice and the knowledge of that in the hearts of men… and that it continues to be among the allowable sales; among the people… because the sale of bales according to the barnamaj, without unfolding, is not intended as a risk and has no similarity to mulamasah”.13 .Thus the legal provision against risk in al-Muwatta was able to inform us about the extensive whole sale trade in the Hijaz at the time.

Similarly the legal provision about the permissibility of exchanging goods for goods without violating the doctrine against risk yields much information about the typ.;s of garments, waist-wrappers, and pieces of cloth being imported into Hijaz at the time. We read of garments from the villages of Shata, Itrib. and Qis in Egypt as well as those from Herat in Khurasan (Afghanistan) and Merv in Central Asia. Likewise we read of waist-wrappers (malahif) and pieces of cloth (shaqa’iq) from Yemen14.

A seemingly simple account about the conduct of trade by means of a partnership of capital and labour (qirad) or commenda might yield information about a variety of other topics. Malik relates that ‘Abd Allah and ‘Ubayd Allah, the sons of Caliph ‘Umar set out with an army to Iraq. On their way back they passed by Abn Musa al-Ash’ari, the “emir of Basrah,” who welcomed them and asked if he could be of benefit to them in any way. Then he said, “Yes, indeed. I have here funds of God’s property (kharaj or jizyah) that I want to send to the Commander of the Faithful. I shall lend these funds to you, then you buy with them goods from Iraq that you will sell in Medina. Whereupon you deliver the capital to the Commander of the Faithful and you keep the profit.” They agreed to this arrangement, and Abu Musa wrote to ‘Umar to take the capital from them. Upon arrival in Medina they sold the goods and made profit. When they came to pay the capital to ‘Umar he asked, “Did (Abu Musa) lend money to the entire army as he lent to you?”They said, “No. ‘Umar then said “He lent it to you because you are the sons of the Commander of the Faithful. Hand over the capital and the profit!”…Then some arguments ensued between ‘Ubayd Allah and his father about the proper course of action, whereupon a man sitting by suggested that the transaction be considered a qirad.‘Umar agreed; he took the capital and half of the profits, while the other half was left to his sons.15

Now, the foregoing account undoubtedly proves that the contract of qirad had been well-known by the time of ‘Umar, and presumably must have figured prominently in the Meccan trade before Islam.16 In the second place, the account supports the view that Abu Musa was a governor (amir) and not a judge (qadi) to whom ‘Umar was said to have addressed his famous instructions, and that in all probability the institution of the judiciary appeared later during the Umayyad administration — unless of course one is to understand that at that early date the function of a governor and that of a judge were indistinguishable.17 In the third place, it is apparent from the account that the processes of administration were at the time still unsettled and in a rather primitive and chaotic form, whereby a governor would allow himself to lend public money to be used in a commercial venture!

Social and Anthropological Information

Here again al-Muwatta’ can be of immense value to the social historian. Information on slavery, on preemption (shuf’ah), on witchcraft, and on funeral and burial practices can be gleaned from its legal contents.

It has been assumed that slaves in Arabia were employed only in-domestic service — including chores in attending animals — or in commercial enterprises. But in Medina, where date plantations were plentiful, slaves were employed in cultivation as well. In fact these slaves seem to have been attached to the plantations in the same way that slaves were an integral part of the plantations in the American South prior to the Civil War.This is evident from a legal provision concerning slaves in a contract of trees and labour (mitsaqat). Malik says, “The best that has been heard concerning slave labourers in a contract of musaqat where the labour contractor makes them a condition bindingonthe owner of the capiial (asl, meaning plantation) is that it is perfectly legal, because they are the labourers of the capital, and therefore, are on the same footing as the capital …If a slave should die, absent himself, or fall sick, it is the duty of the owner of the capital to replace him.”18

When slaves are manumitted a special relationship called wala’ continues to exist between the previous master and the freed slave. Apart from the sentiments of loyalty and support that the term implies, and that are so important in a society that is organized on kinship groups, whether actual or fictional, wala’ can be financially important in that by virtue of his act of manumission the master acquires the right to inherit from his freedman if the latter dies without any heirs by blood.19 Still, this right to wala’ was not a proprietary right to be bought or sold or given as a gift; it was akin to a family relationship that was inalienable. The Prophet was reported to have said that wala’ belonged to the manumitter, and he prohibited the sale of wala’ or giving it as a gift.20 But what becomes of wala’ when the manumitter dies? Does it devolve upon the heirs in the same way that his estate does? It is indicative of the personal relationship that this institution suggests — as opposed to a proprietary relationship — that the devolution of wala’ was held to be different from that of the general estate of the deceased, and that it devolved not to the heirs at law but to the people who were held nearest to the ex-slaves in a personal way. Malik illustrates I his from an actual case.Several people from the tribe of Juhaynah, near Medina, and several others from the clan of Bani al-Harith of al-Khazraj tribe of Medina submitted a dispute to Aban ibn ‘Uthman.21 A woman from Juhaynah was married to one Ibrahim ibn Kuiayb of Bani al-Harith. When she died she left property and ex-slaves (mawali). Her son inherited her estate. But the son soon died, and his heirs at law said, “the wala’ of the ex-slaves belongsto us; her son had acquired it,” and the people from Juhayuah said, “Not so; they were the ex-slaves of our “daughter” (sahibatuna); when her son died we acquired their wala, and we (therefore) will be their heirs.” Aban gave judgment in favor of the people of Juhaynah22, presumably because there was no personal relationship or “kinship” between the son’s heirs, who must have been collaterals, and the ex-slaves, whereas such a relationship existed between the ex-slaves and the blood relatives of the women.

An institution which has had a chequered history in Islam and which still holds sway in some Islamic countries is that of preemption (shuf’ah) whereby a person would substitute himself for the buyer in a completed sale of real property. As fully developed this institution would give the right of substitution to the following persons in order: the co-owner, the owner of a servitude in the property, and the owner of an adjoining properly.21 Doubtless, the basic reason for this institution is the natural desire to keep an outsider or a stranger out of a family property or a tightly-knit neighborhood. This desire must have become gradually stronger with the passage of time, the spread of Islam, and the development of cosmopolitan centres with an admixture of populations of many races. Later Hanafi works devote large sections to the legal incidents of this institution and to the strict procedure to be followed if a claimant is to be successful. But al-Muwaffa’ devotes only four pages to it, and what is more, it limits the right of preemption to the co-owner.24 There is no mention of a khalit — or owner of a servitude in the property — or of a neighbor. A social historian should not be surprised at this. Medina’s milieu is mostly Arab — except for traders, singers, slaves and ex-slaves etc., and the owners of real property are still the old families of Medina. The need for a well-developed doctrine of preemption to keep strangers out had not arisen as it had in Iraq, with its cosmopolitan population, where Hanafi law was being expounded.

Other questions of anthropological interest that illuminate the Hijazi scene for the social historian deal with funeral and burial practices. Malik reports that Abu Hurayrah, a well-known Companion of the Prophet, “forbade that he be followed by fire after his death,”and Malik himself censures this practice.15 Now, what is this fire? Was it a pre-Islamic heathen practice that was continued for a brief time during Islam, or was it a Zoroastrian practice that left its traces in Arabia? Other sources have no explanation for irisenigmatic reference. In burial practices there seems to have been a difference between those of Mecca and those of Medina going back into pre-Islamic times. This is apparent in the report given by Malik — and doubtless by many hadith and sirah works — about the interment of the Prophet. According to this report there were in Medina two menwho buried the dead, one of whom prepared burial niches (yalhad), while the other did not so prepare. They (the Muslims) said. “Whoever comes first will be allowed to followhis own practice.” The man who prepared niches came first, so he prepared a niche for the Messenger of God.26 In commenting on this text, al-Suyufi says that one man was from Mecca where the practice was to dig a ditch (shaqq), and the other, who prepared the tomb for the Prophet, was from Medina where the practice was to build niches.27Why the difference between the two Hijazi cities? One can speculate that Medina, being an oasis, had a more settled existence going hack in time; its tombs, therefore, reflected this permanence and settlement. Mecca, on the other hand, even though engaged in commerce, was very close to Bedouin life where the more austere nomadic, existence would permit onlya ditch in the ground for burying the dead.

Finally, matters of witchcraft, and popular beliefs might be of interest to the social historian. Abhorrence of witchcraft must have been just as strong in early Islam as it was in Salem, Massachusetts, in Colonial America, with similar results. Malik reports that Hafsah, the wife of the Prophet, ordered the killing of a slave girl she had tentatively freed (with freedom to take effect after Hafsah’s death) because the slave girl had practiced witchcraft against her. He defines a witch or sorcerer as a person who himself practices witchcraft and not a person who procures another so to do. He further opines that a witch or sorcerer should be killed.28 It is obvious that the motive of the supposed witch in Hafsah’s case was to cause the death of Hafsah so that she would hasten her freedom after such death, but is every practice of witchcraft, short of causing death, to be punished by death? The Commentators do not enlighten us on that, nor do we know of other instances where witches were killed.

As can be seen, these soundings in al-Muwatta’ can produce some substantial information and some information which is tantalizing because of its brevity. But in either case such information, added sometimes to information from other sources, might be very valuable and might nil some gaps in our understanding of the social and economic history of the Hijaz.

NOTES

1. Partnership and Profit in Medieval Islam. Princeton, 1970, pp. 16, 142-143, 175 et passim. For his summary in English of the “Book of Qirad” of al-Muwatta’ see Speculum 37 (1962), pp. 204-207.

MasterCard Worldwide and Malaysia’s EonCap Islamic Bank have jointly launched what they are calling the world’s first Islamic debit MasterCard.The EonCap Islamic Debit MasterCard is basically a debit card with ATM functions, as well, Business Week reports. It also works on PayPass systems and is compliant with Islamic religious law, which prohibits earning or paying interest.

“The card ensures that purchases are automatically deducted from the cardholder’s account and approved only if enough funds exist within the account,” said Fozia Amanulla, chief executive officer of EonCap Islamic Bank.

“It helps track spending, comes with worldwide acceptance at more than 26 million locations, and can be used at an ATM for e-banking.”

Shuan Ghaidan, head of product sales and delivery, Asia-Pacific at MasterCard Worldwide, said: “The EonCap Islamic Debit MasterCard card is designed for individuals who prefer to spend what they have in their accounts, yet seek the same functionality and assurances of a credit card.”